Appeal Details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 0037 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 1 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-03-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
I
Assessment Year
2012-2013
Appeal Filed On
30-01-2017
Judgement Text
1 ITA NO. 483/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 483/DEL/201 7 (A.Y 2012-13) (THROUGH VIDEO CON FERENCING) GEODIS OVERSEAS PVT. LTD. BUILDING NO. 5, TOWER B, 10 TH FLOOR, DLF CYBER CITY GURGAON AAACC6168L (APPELLANT) VS DCIT CIRCLE-10(1) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 24/11/2016 ORDER PASSED BY 144C(1)(3) READ WITH SECTION 143 (3 ) OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE IMPUGNED ORDER OF ASSESSMENT FRAMED BY T HE ASSESSING OFFICER (AO) IN PURSUANCE OF THE DIRECTIONS OF TH E DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO AS DRP) UNDER SECTION 14 3(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (ACT), IS BAD IN LAW, VOLATILE OF PRINCIPLES OF NATURAL JUSTICE AND VOID AB- JNITIO. 2. THAT THE ASSESSING OFFICER ERRED ON FACTS AND IN LA W IN COMPLETING THE APPELLANT BY SH. VISHAL KALRA, ADV RESPONDENT BY SH. SURENDER PAL, CIT DR DATE OF HEARING 25.02.2021 DATE OF PRONOUNCEMENT 17.03.2021 2 ITA NO. 483/DEL/2017 ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 44C OF THE INCOME-TAX ACT (THE ACT) AT AN INCOME OF RS. 184,341,870 AS AGAINST INR 72,692,430 RETURNED INCOME. 3. TRANSFER PRICING ISSUES : 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / DRP /TRANSFER PRICING OFFICER (TPO) HAVE ERRED IN DIS ALLOWING PAYMENT OF INR 90,936,248 BY THE APPELLANT TO ITS ASSOCIATED ENTER PRISES ON ACCOUNT OF ALLOCATION OF MANAGEMENT AND SUPPORT CHARGES INCURR ED BY THE APPELLANT. 3.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO / DRP / TPO HAVE ERRED IN HOLDING THE INTERNATIONAL TRANSACTION OF ALLOCATION OF MANAGEMENT AND IT SUPPORT CHARGES TO BE NOT AT A RMS LENGTH IN TERMS OF THE PROVISIONS OF SECTIONS 92C(1) AND 92C(2) OF THE ACT, READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 (RULES). 3.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO / TPO HAVE NOT APPRECIATED THE BUSINESS MODEL, FUNCTIONAL , ASSET AND RISK PROFILE OF THE APPELLANT AND HAVE FURTHER ERRED IN NOT ACCEPTI NG THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES FOR THE DETERMINATION OF THE ARMS L ENGTH PRICE (ALP). 3.4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP/TPO HAVE ERRED IN NOT APPRECIATING THE DOCUM ENTARY EVIDENCE SUBMITTED BY THE APPELLANT, UNAMBIGUOUSLY JUSTIFYIN G THE RECEIPT OF SUCH SERVICES AND ALLOCATION OF COST. THE AO / DRP / TPO HAVE FURTHER ERRED IN QUESTIONING THE SANCTITY OF THE INTER-COMPANY AGREE MENTS. 3.5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO/TPO HAVE ERRED IN STATING ERRONEOUS FACTS WHILE REJECTI NG THE BENCHMARKING ANALYSIS OF THE APPELLANT AND NOT APPRECIATING THE APPROACH UNDERTAKEN BY THE APPELLANT IN ITS TRANSFER PRICING DOCUMENTATION . THE AO / TPO HAVE FURTHER ERRED IN UNDERTAKING A FRESH ANALYSIS WITHOUT DOCUM ENTING COGENT REASONS UNDER SECTION 92C(3) OF THE ACT FOR REJECTING THE D OCUMENTATION OF THE APPELLANT WITH RESPECT TO THE INTERNATIONAL TRANSAC TION OF ALLOCATION OF MANAGEMENT SUPPORT AND IT CHARGES. 3.6 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO/DRP/TPO HAVE ERRED IN BENCHMARKING MANAGEMENT SU PPORT AND IT 3 ITA NO. 483/DEL/2017 CHARGES USING COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AND DETERMINING THE ARMS LENGTH PRICE TOWARDS SUCH PAYMENT OF CHAR GES FOR MANAGEMENT AND SUPPORT SERVICES AS NIL, WHICH IS NOT IN ACCORDAN CE WITH THE PROVISIONS OF CHAPTER-X READ WITH RULES 10 OF INCOME TAX RULES, 1 962 (RULES). 3.7 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP DIRECTIONS ARE BAD IN LAW AS THE DRP BENCHMARKED TH E MANAGEMENT SUPPORT AND IT CHARGES OF THE APPELLANT USING THE OPERATING EXPENSES UPON SALES OF SOME COMPANIES, WITHOUT EVEN PROVIDING THE SEARCH P ROCESS AS WELL AS THE COMPANIES USED FOR THE PURPOSE OF BENCHMARKING TO T HE APPELLANT. 3.8 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP DIRECTIONS ARE BAD IN LAW AS THE OPERATING EXPENSES UPON SALES RATIO (BRIGHT LINE) OF THE UNKNOWN COMPARABLE COMPANIES USED BY DRP WITH THE R ATIO OF OPERATING EXPENSES UPON SALES OF THE APPELLANT, WITHOUT APPRE CIATING THAT SUCH AN APPROACH IS NOT STIPULATED UNDER ANY METHODS PRESCR IBED UNDER CHAPTER X READ WITH THE RULE 10 OF THE RULES THERE UNDER TO D ETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION OF MANAGEMENT SUPPORT AND IT CHARGES. 3.9 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DIRECTIONS PASSED BY DRP AND THE SUBSEQUENT ORDERS PASSED BY L OWER AUTHORITIES ARE BAD IN LAW AND VOID AB-INITIO AS THE DRP HAS ENHANC ED THE DISALLOWANCE FOR MANAGEMENT SUPPORT AND IT CHARGES TO 1NR 90,936,248 AS AGAINST DISALLOWANCE OF INR 77,393,666 MADE BY THE TPO, WIT HOUT PROVIDING AN OPPORTUNITY OF BEING HEARD, WHICH IS SINE QUA NON A S PER SECTION 144C(1 1) OF THE ACT. 3.10 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DIRECTIONS ARE BAD IN LAW AND VOID AB-INITIO AS THE DRP HAS ERRED IN OBSERVING / DIRECTING THAT THE MANAGEMENT SUPPORT AND IT CHARGES AMOUNTIN G TO INR 90,936,248 ARE ALTERNATIVELY DISALLOWABLE UNDER SECTION 37(1) OF THE ACT, WITHOUT PASSING A SPEAKING ORDER ON THE ISSUE AND PROVIDING AN OPPO RTUNITY OF BEING HEARD, WHICH IS SINE QUA NON AS PER SECTION 144C( 11) OF T HE ACT. 3.11 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE AO/DRP/TPO HAVE ERRED IN UNDERTAKING SEPARATE BENCH MARKING ANALYSIS FOR ALLOCATION OF MANAGEMENT AND SUPPORT CHARGES, IGNOR ING THE FACT THAT THE REIMBURSEMENTS WERE BENCHMARKED WITH THE PRIMARY TR ANSACTION USING ENTITY LEVEL TRANSACTIONAL NET MARGIN METHOD (TNMM). 4 ITA NO. 483/DEL/2017 4. CORPORATE TAX GROUNDS 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, AO ERRED IN MAKING DISALLOWANCE AND DRP ERRED IN UPHOLDING DISA LLOWANCE OF INR 20,713,187 BEING DEPRECIATION CLAIMED UNDER SECTION 32(1 )(II) OF THE ACT, ON THE AMOUNT OF GOODWILL. 4.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/ DRP ERRED IN HOLDING THAT GOODWILL DOES NOT QUALIFY AS 'BUSINESS OR COMMERCIAL RIGHT AS ENVISAGED UNDER SECTION 32(1 ) (II) OF THE ACT. 4.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE AO ERRED IN LEVYING INTEREST UNDER SECTION 234B AND SE CTION 234D OF THE ACT. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOU T PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANS PORTATION OF TIME SENSITIVE PACKAGES, DOCUMENTS AND CARGO TO DOMESTIC AND INTERNATIONAL DESTINATIONS. THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME ON 30/11/2012. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAD UNDERTAKEN INTERNATIONAL TRANSACTION WITH ITS ASSOC IATED ENTERPRISES. IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92CA OF T HE INCOME TAX ACT, THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE WITH THE ASSOCIATED ENTERPRISES WERE REFERRED TO THE TRANSFER PRICING O FFICE FOR DETERMINING THE ARMS LENGTH PRICE. THE TPO PASSED ORDER U/S 92CA(3 ) OF THE ACT, ON 21/1/2016 THEREBY MAKING ADJUSTMENT OF RS. 7,73,93, 666/-. THE DRAFT ASSESSMENT WAS PASSED ON 15/3/2016 THEREBY MAKING A DDITION OF RS. 2,07,13,187/- ON ACCOUNT OF DEPRECIATION ON GOODWIL L AND ALSO AS PER THE TRANSFER PRICING ADJUSTMENT AT RS.7,73,93,666/-. T HE ASSESSEE FILED OBJECTIONS BEFORE THE DRP AND THE DRP HAS GIVEN DIRECTIONS U/S 144C (5) OF THE ACT VIDE ORDER DATED 18/10/2016. AFTER FOLLOWING THE DIREC TIONS ISSUED BY THE DRP, THE TRANSFER PRICING OFFICER HAS GIVEN AN ORDER GIVING EFFECT VIDE ORDER DATED 8/11/2016 THEREBY MAKING REVISED TOTAL ADJUSTMENT T O THAT OF 5 ITA NO. 483/DEL/2017 RS.9,09,36,248/-. THE ASSESSMENT ORDER WAS PASSED ON 24/11/2016 THEREBY MAKING AN ADDITIONS AS PER THE DIRECTIONS GIVEN BY THE DRP AND ASSESSING THE INCOME AT RS. 18,43,41,870/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT GROUND NO. 1 & 2 ARE G ENERAL. THE LD. AR FURTHER SUBMITTED THAT IN LIGHT OF APA GROUND NO. 3 , 3.1 TO 3.1.1 ARE WITHDRAWN AS THE SAME ARE ACADEMIC. AS REGARDS GROUND NO. 4 & 4.1, THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ITA NO. 2305/DEL/2015 ASSESSMENT YEAR 2010-11 ORDER DATED 1 8/05/2020 WHICH IS FOLLOWED IN ITA NO. 2242/DEL/2016 FOR ASSESSMENT YE AR 2011-12 ORDER DATED 28/10/2020. AS RELATED TO GROUND NO. 4.2, THE SAME IS ALSO COVERED BY THE SAID DECISION OF THE TRIBUNAL. 6. THE LD. DR RELIED UPON THE ORDER OF THE TPO AND DRP AND FURTHER SUBMITTED THAT GOODWILL IS NOT INCLUSIVE AND HENCE THE ADJUSTMENT AND THE ADDITIONS MADE BY THE TPO/A.O ARE JUST AND PROPER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. SINCE, GROUND NO. 1 & 2 ARE GENERAL. THE SAME ARE NOT ADJUDICATED UPON. AS REGARDS GROUND NO. 3, 3.1 TO 3.11, THE SA ME ARE DISMISSED AS WITHDRAWN. AS REGARDS GROUND NO. 4 & 4.1, THE TRIB UNAL IN ASSESSEES OWN CASE FOR A.Y. 2010-11 HELD AS UNDER:- 40. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO/TPO/DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND, THE AO, IN THE INSTANT CASE, DISALLOWED DE PRECIATION ON GOODWILL ON THE GROUND THAT THE ASSESSEE HAS NOT BECOME THE SOL E LOGISTIC SERVICE PROVIDER TO IBM INDIA, THE VALUE OF WORKFORCE DOES NOT FACIL ITATE THE SMOOTH CARRYING ON OF THE BUSINESS OF THE ASSESSEE AND THE SUPPLIER CO NTRACTS FORMING PART OF THE 6 ITA NO. 483/DEL/2017 ACQUISITION AGREEMENT HAVE EXPIRED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO THE AO, THE ASSESSEE HAS NOT ACQUIRED ANY BUSINESS DURING THE YEAR AND, HENC E, THERE IS NO QUESTION OF MAKING PAYMENT OVER AND ABOVE FOR ANY COMMERCIAL OR BUSINESS RIGHTS AS DEFINED UNDER EXPLANATION 3 TO SECTION 32(1). FURT HER, THE PURCHASE PRICE IS NOT VERIFIABLE FROM ANY CALCULATION OR VALUATION RE PORT. ACCORDING TO THE AO, THERE IS DECLINE IN THE BUSINESS RECEIPTS EVEN AFT ER PAYING SO MUCH ON ACCOUNT OF GOODWILL AND, THEREFORE, THERE IS NO JUS TIFICATION FOR THE PAYMENT OF SUCH AMOUNT. FURTHER, IT IS ALSO THE CASE OF THE A O THAT AS PER THE PROVISIONS OF LAW, NO DEPRECIATION IS ALLOWABLE ON GOODWILL AN D THE LEGISLATURE PROVIDES THAT DEPRECIATION SHOULD BE ALLOWED ON ALL OTHER IN TANGIBLE ASSETS OTHER THAN GOODWILL. 41. WE FIND, THE HONBLE DELHI HIGH COURT IN THE CA SE OF AREVA T & D INDIA LTD. VS. DCIT, 345 ITR 421 HAS DECIDED AN IDE NTICAL ISSUE IN FAVOUR OF THE ASSESSEE. IN THAT CASE, THE FOLLOWING SUBSTANT IAL QUESTION OF LAW WAS ADMITTED:- 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL ERRED IN LAW IN HOLDING THAT KNOW-HOW, BUSINESS CON TACTS, BUSINESS INFORMATION, ETC. ACQUIRED AS PART OF THE SLUMP SAL E DESCRIBED AS GOODWILL WERE NOT ENTITLED FOR DEPRECIATION UNDER SECTION 32 (1)(II) OF THE INCOME TAX ACT?' 42. WE FIND, THE HONBLE DELHI HIGH COURT IN THE SA ID DECISION HAS HELD THAT SPECIFIED INTANGIBLE ASSETS, VIZ., BUSINESS CL AIMS, BUSINESS INFORMATION, BUSINESS RECORDS, CONTRACTS, EMPLOYEES AND KNOW-HOW ACQUIRED BY ASSESSEE UNDER SLUMP SALE AGREEMENT ARE IN NATURE OF 'BUSINE SS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SPECIFIED IN SECTION 32(1)(II) AND ARE ACCORDINGLY ELIGIBLE FOR DEPRECIATION UNDER THAT SECTION. 43. THE RELEVANT OBSERVATION OF THE HONBLE HIGH CO URT FROM PARA 12 TO 15 ARE AS UNDER:- 12. IN THE PRESENT CASE, IT IS SEEN THAT THE ASSE SSEE VIDE SLUMP SALE AGREEMENT DATED 30TH JUNE, 2004, ACQUIRED, AS A GOI NG CONCERN, THE TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANS FEROR COMPANY W.E.F. 1 ST APRIL, 2004. AS A RESULT THEREOF, THE RUNNING BU SINESS OF TRANSMISSION AND DISTRIBUTION WAS ACQUIRED BY THE TRANSFEREE LOC K, STOCK AND BARREL 7 ITA NO. 483/DEL/2017 MINUS THE TRADEMARK OF THE TRANSFEROR WHICH WAS RET AINED BY THE TRANSFEROR, FOR LUMP SUM CONSIDERATION OF RS.44.7 C RORES. IT IS FURTHER SEEN THAT THE BOOK VALUE OF THE NET TANGIBLE ASSETS (ASS ETS MINUS LIABILITIES) ACQUIRED WAS RECORDED IN THE BALANCE SHEET OF THE T RANSFEROR AS ON THE DATE OF TRANSFER AS RS.28.11 CRORES. THE SAID ASSET S AND LIABILITIES WERE RECORDED IN THE BOOKS OF TRANSFEREE AT THE SAME VAL UE AS APPEARED IN THE BOOKS OF THE TRANSFEROR. THE BALANCE PAYMENT OF RS. 16,58,76,000/- OVER AND ABOVE THE BOOK VALUE OF NET TANGIBLE ASSETS, WA S ALLOCATED BY THE TRANSFEREE TOWARDS ACQUISITION OF BUNDLE OF BUSINES S AND COMMERCIAL RIGHTS, CLEARLY DEFINED IN THE SLUMP SALE AGREEMENT , COMPENDIOUSLY TERMED AS 'GOODWILL' IN THE BOOKS OF ACCOUNTS, WHICH COMPR ISED, INTER ALIA, THE FOLLOWING:- (I) BUSINESS CLAIMS, (II) BUSINESS INFO RMATION, (III) BUSINESS RECORDS, (IV) CONTRACTS, (V) SKILLED EMPLOYEES, (VI ) KNOWHOW. IT IS ALSO OBSERVED THAT THE AO ACCEPTED THE ALLOCATION OF THE SLUMP CONSIDERATION OF RS.44.7 CRORES PAID BY THE TRANSFEREE, BETWEEN TANG IBLE ASSETS AND INTANGIBLE ASSETS (DESCRIBED AS GOODWILL) ACQUIRED AS PART OF THE RUNNING BUSINESS. THE AO, HOWEVER, HELD THAT DEPRECIATION I N TERMS OF SECTION 32(1)(II) OF THE ACT WAS NOT, IN LAW, AVAILABLE ON GOODWILL. THE CIT(A) AND THE ITAT APPROVED THE REASONING OF THE AO THEREBY H OLDING DISALLOWANCE OF DEPRECIATION ON THE AMOUNT DESCRIBED AS GOODWILL. I T WAS THUS ARGUED ON BEHALF OF THE ASSESSEE COMPANY THAT SECTION 32(1)(I I) WOULD MEAN RIGHTS SIMILAR IN NATURE AS THE SPECIFIED ASSETS, VIZ., IN TANGIBLE, VALUABLE AND CAPABLE OF BEING TRANSFERRED AND THAT SUCH ASSETS W ERE ELIGIBLE FOR DEPRECIATION. ON BEHALF OF THE RESPONDENT IT WAS AR GUED THAT APPLYING THE DOCTRINE OF NOSCITUR SOCIIS THE EXPRESSION 'ANY OTH ER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' USED IN EXPLAN ATION 3(B) TO SECTION 32(1) HAS TO TAKE COLOUR FROM THE PRECEDING WORDS ' KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES'. IT W AS URGED THAT THE SUPREME COURT HAD CLEARLY HELD IN TECHNO SHARES AND STOCKS LTD.(SUPRA) THAT 'OUR JUDGMENT SHOULD NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A 'LICENCE' OR A 'FRANCHISE' IN TERMS OF SECTION 32(1)(II) OF 1961 ACT'. 13. IN THE PRESENT CASE, APPLYING THE PRINCIPLE OF EJUSDEM GENERIS, WHICH PROVIDES THAT WHERE THERE ARE GENERAL WORDS FOLLOWI NG PARTICULAR AND SPECIFIC WORDS, THE MEANING OF THE LATTER WORDS SHA LL BE CONFINED TO THINGS OF THE SAME KIND, AS SPECIFIED FOR INTERPRETING THE EXPRESSION 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SPECIFIED IN S ECTION 32(1)(II) OF THE ACT, IT IS SEEN THAT SUCH RIGHTS NEED NOT ANSWER TH E DESCRIPTION OF 'KNOWHOW, PATENTS, TRADEMARKS, LICENSES OR FRANCHIS ES' BUT MUST BE OF 8 ITA NO. 483/DEL/2017 SIMILAR NATURE AS THE SPECIFIED ASSETS. ON A PERUSA L OF THE MEANING OF THE CATEGORIES OF SPECIFIC INTANGIBLE ASSETS REFERRED I N SECTION 32(1)(II) OF THE ACT PRECEDING THE TERM 'BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE', IT IS SEEN THAT THE AFORESAID INTANGIBLE ASSETS ARE NO T OF THE SAME KIND AND ARE CLEARLY DISTINCT FROM ONE ANOTHER. THE FACT THA T AFTER THE SPECIFIED INTANGIBLE ASSETS THE WORDS 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HAVE BEEN ADDITIONALLY USED, CLEARLY DEMONS TRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIAT ION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CATEG ORIES OF INTANGIBLE ASSETS, WHICH WERE NEITHER FEASIBLE NOR POSSIBLE TO EXHAUST IVELY ENUMERATE. IN THE CIRCUMSTANCES, THE NATURE OF 'BUSINESS OR COMMERCIA L RIGHTS' CANNOT BE RESTRICTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOWHOW, PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES OR FRANCH ISES. THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS' CAN BE OF THE SAME GENUS IN WHICH ALL THE AFORESAID SIX ASSETS FALL. ALL THE ABOVE FALL IN TH E GENUS OF INTANGIBLE ASSETS THAT FORM PART OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOTH CARRYING ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN CASE OF THE ASSESSEE, INTANGIBLE ASSETS, VIZ., BUSI NESS CLAIMS; BUSINESS INFORMATION; BUSINESS RECORDS; CONTRACTS; EMPLOYEES ; AND KNOWHOW, ARE ALL ASSETS, WHICH ARE INVALUABLE AND RESULT IN CARRYING ON THE TRANSMISSION AND DISTRIBUTION BUSINESS BY THE ASSESSEE, WHICH WA S HITHERTO BEING CARRIED OUT BY THE TRANSFEROR, WITHOUT ANY INTERRUP TION. THE AFORESAID INTANGIBLE ASSETS ARE, THEREFORE, COMPARABLE TO A L ICENSE TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANSFEROR. IN THE ABSENCE OF THE AFORESAID INTANGIBLE ASSETS, THE ASS ESSEE WOULD HAVE HAD TO COMMENCE BUSINESS FROM SCRATCH AND GO THROUGH TH E GESTATION PERIOD WHEREAS BY ACQUIRING THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE ASSETS, THE ASSESSEE GOT AN UP AND RUNNING BUSINESS . THIS VIEW IS FORTIFIED BY THE RATIO OF THE DECISION OF THE SUPREME COURT I N TECHNO SHARES AND STOCKS LTD.(SUPRA) WHEREIN IT WAS HELD THAT INTANGI BLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHICH EN ABLES THE ASSESSEE TO ACCESS THE MARKET AND HAS AN ECONOMIC AND MONEY VALUE IS A 'LICENSE' OR 'AKIN TO A LICENSE' WHICH IS ONE OF THE ITEMS FA LLING IN SECTION 32(1)(II) OF THE ACT. 14. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE SPECIFIED INTANGIBLE ASSETS ACQUIRED UNDER SLUMP SALE AGREEME NT WERE IN THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE ' SPECIFIED IN SECTION 32(1)(II) OF THE ACT AND WERE ACCORDINGLY ELIGIBLE FOR DEPRECIATION UNDER THAT SECTION. 9 ITA NO. 483/DEL/2017 15. IN VIEW OF THE ABOVE, IT IS NOT NECESSARY TO DE CIDE THE ALTERNATIVE SUBMISSION MADE ON BEHALF OF THE ASSESSEE THAT GOOD WILL PER SE IS ELIGIBLE FOR DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT . IN THE CIRCUMSTANCES, THE SUBSTANTIAL QUESTION OF LAW IS DECIDED IN THE A FFIRMATIVE AND THIS APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE AND THE IMPUGNED ORDER IS SET ASIDE. 44. WE FURTHER FIND THE SLP FILED BY THE REVENUE AG AINST THE AFORESAID DECISION WAS DISMISSED BY THE HONBLE SUPREME COURT , VIDE ORDER DATED 23 RD SEPTEMBER, 2013 VIDE SLP 21227/2012. 45. WE FURTHER FIND, THE DELHI SPECIAL BENCH IN THE CASE OF CLC & SONS PRIVATE LTD. (SUPRA), WHILE ALLOWING DEPRECIATION ON GOODWILL HAS HELD AS UNDER:- 7. IT IS OVERT FROM THE COMMAND OF CLAUSE (II) OF SECTION 32(1) OF THE ACT THAT DEPRECIATION IS PERMISSIBLE IN RESPECT OF INTA NGIBLE ASSETS LISTED HEREIN, ACQUIRED ON OR AFTER 01.04.1998. THIS CLAUS E CONTAINS CERTAIN SPECIFIED AND UNSPECIFIED SPECIES OF INTANGIBLE ASS ETS. WHEREAS THE SPECIFIED INTANGIBLE ASSETS ENSHRINED IN THE PROVIS ION INCLUDE KNOW-HOW, PATENT AND COPYRIGHTS ITA NO.1976/DEL/2006 ETC., TH E UNSPECIFIED INTANGIBLE ASSETS HAVE BEEN DESCRIBED WITH THE EXPR ESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE.' I T IS NOBODY'S CASE THAT GOODWILL IS A SPECIFIED INTANGIBLE ASSET. THE ASSES SEE HAS SOUGHT TO COVER `GOODWILL' WITHIN THE EXPRESSION DEPLOYED TO DEFINE UNSPECIFIED INTANGIBLE ASSETS. AU CONTRAIRE, THE A.O. HAS CANVASSED A VIEW THAT THE EXPRESSION USED IN THE PROVISION FOR DEFINING UNSPECIFIED INTA NGIBLE ASSETS CANNOT EMBRACE SOMETHING WHICH IS INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESSEE. HE BOLSTERED HIS POINT OF VIEW BY NOTING THAT THE SPECIFIED ASSETS IN THE PROVISION ARE SUCH WHICH ARE DETACHABLE FROM THE BUSINESS OF THE ASSESSEE AND TRANSFERRABLE INDIVIDUALLY AND SEPARAT ELY. IN THIS LIGHT, HE HELD THAT THE EXPRESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' WOULD INCLUDE ONLY SUCH ASSETS WHIC H ARE TRANSFERRABLE DISTINCTLY. GOODWILL OF A BUSINESS, BEING, AN INTAN GIBLE ASSET WHICH CANNOT BE TRANSFERRED SEPARATELY DE HORS THE TRANSFER OF B USINESS, WAS, ERGO, HELD TO BE NOT INCLUDIBLE IN THE EXPRESSION USED IN THE PROVISION TO EXPLAIN THE UNSPECIFIED INTANGIBLE ASSETS. IN OUR CONSIDERED OP INION, THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HON 'BLE SUMMIT COURT IN CIT VS. SMIFS SECURITIES LTD. (2012) 348 ITR 302 (SC) IN WHICH IT ITA NO.1976/DEL/2006 HAS BEEN HELD: 'THAT GOODWILL WILL FALL UNDER THE EXPRESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIG HTS OF SIMILAR NATURE'' 10 ITA NO. 483/DEL/2017 AND, HENCE, QUALIFIES FOR DEPRECIATION U/S 32(1) OF THE ACT. WE, THEREFORE, ANSWER THE LEGAL ISSUE RAISED IN THE QUESTION BEFOR E THE SPECIAL BENCH IN AFFIRMATIVE BY HOLDING, IN PRINCIPLE, THAT DEPRECIA TION IS AVAILABLE ON GENUINE GOODWILL. 46. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD . COUNSEL FOR THE ASSESSEE ALSO SUPPORT HIS CASE TO THE PROPOSITION T HAT DEPRECIATION IS ALLOWABLE ON GOODWILL. 47. WE FURTHER FIND THE ALLEGATION OF THE AO THAT T HE YEAR-WISE REVENUE FROM LOGISTIC SERVICES TO IBM INDIA IS SHOWING A DE CLINING TREND IS ALSO INCORRECT. A PERUSAL OF THE CHART AT PARA 32 OF TH IS ORDER SHOWS THAT THERE IS, IN FACT, INCREASE OF REVENUE FROM IBM. 48. IN VIEW OF THE ABOVE DISCUSSION AND RELYING ON THE DECISIONS CITED (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO D EPRECIATION ON GOODWILL. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D. 8. AS REGARDS GROUND NO. 42 IN ASSESSMENT YEAR 2011 -12, THE TRIBUNAL HELD IN PARA 17 TO 25 ARE AS UNDER:- 17. THE SECOND GRIEVANCE RELATES TO DISALLOWANCE O F DEPRECIATION ON GOODWILL. 18. FACTS ON RECORD SHOW THAT THE APPELLANT ENTERED INTO A WORLD-WIDE MULTI-YEAR OUTSOURCING AGREEMENT WITH IBM INDIA PRI VATE LIMITED, NETWORK SOLUTIONS PRIVATE LIMITED AND IBM DAKSH BUSINESS PR OCESS SERVICES PRIVATE LIMITED TO ACQUIRE THE FREIGHT FORWARDING BUSINESS/ INTERNAL GLOBAL LOGISTICS OPERATIONS OF IBM IN INDIA FOR A CONSIDERATION OF R S. 14,78 CRORES. 19. THE APPELLANT ACQUIRED TANGIBLE ASSETS, EMPLOYE ES, SUPPLIER CONTRACTS OF IBM. CONSIDERATION OF RS. 14.72 CRORES PAID BY THE APPELLANT REPRESENTS THE VALUE OF TRANSFERRED WORKFORCE AND S UPPLIER CONTRACTS INCLUDING THE RIGHT TO PROVIDE LOGISTICS SERVICES TO IBM INDI A FOR A MAXIMUM PERIOD OF 15 YEARS. THE APPELLANT HAS CHARACTERISED THESE AS GOO DWILL AND CLAIMED DEPRECIATION ON THE SAME AT THE RATE OF 25% UNDER S ECTION 32(I)(II) OF THE ACT. 20. HOWEVER, THE CLAIM OF THE ASSESSEE WAS DISMISSE D BY THE ASSESSING OFFICER WHO WAS OF THE FIRM BELIEF THAT THE DEPRECI ATION ON GOODWILL WAS NOT 11 ITA NO. 483/DEL/2017 ALLOWABLE AS A DEDUCTION IN LIGHT OF THE PROVISIONS OF EXPLANATION 3 TO SECTION 32(1) OF THE ACT. 21. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE BRO UGHT TO OUR NOTICE THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 2305/DEL/2015 FOR A.Y 2010-11 AND POINTED OUT THAT TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE APPELLANT. 22. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS O F THE DRP. 23. WE FIND FORCE IN THE CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE. WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT T HE INITIAL YEAR OF CLAIM OF DEPRECIATION AND IN THIS YEAR, THE ASSESSEE HAS CLA IMED DEPRECIATION ON THE WRITTEN DOWN VALUE. WE FIND THAT IN THE IMMEDIATEL Y PRECEDING A.Y I.E. 2010- 11, THIS DISPUTE HAS BEEN SETTLED BY THE CO-ORDINAT E BENCH IN ASSESSEES OWN CASE [SUPRA]. 24. THE RELEVANT FINDINGS READ AS UNDER: 40. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO/TPO/DRP AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND, THE AO, IN THE INSTANT CASE, D ISALLOWED DEPRECIATION ON GOODWILL ON THE GROUND THAT THE ASSESSEE HAS NOT BE COME THE SOLE LOGISTIC SERVICE PROVIDER TO IBM INDIA, THE VALUE OF WORKFOR CE DOES NOT FACILITATE THE SMOOTH CARRYING ON OF THE BUSINESS OF THE ASSESSEE AND THE SUPPLIER CONTRACTS FORMING PART OF THE ACQUISITION AGREEMENT HAVE EXPIRED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDING TO THE AO, THE ASSESSEE HAS NOT ACQUIRED ANY BUSINESS DURING THE YEAR AND, HENCE, THERE IS NO QUESTION OF MAKING PAYMENT OVER AND ABOVE FOR ANY COMMERCIAL OR BUSINESS RIGHTS AS DEFI NED UNDER EXPLANATION 3 TO SECTION 32(1). FURTHER, THE PURCHASE PRICE IS NOT VERIFIABLE FROM ANY CALCULATION OR VALUATION REPORT. ACCORDING TO THE AO, THERE IS DECLINE IN THE BUSINESS RECEIPTS EVEN AFTER PAYING SO MUCH ON ACC OUNT OF GOODWILL AND, THEREFORE, THERE IS NO JUSTIFICATION FOR THE PAYMEN T OF SUCH AMOUNT. FURTHER, IT IS ALSO THE CASE OF THE AO THAT AS PER THE PROVISIONS OF LAW, NO DEPRECIATION IS ALLOWABLE ON GOODWILL AND THE LEGIS LATURE PROVIDES THAT DEPRECIATION SHOULD BE ALLOWED ON ALL OTHER INTANGI BLE ASSETS OTHER THAN GOODWILL. 12 ITA NO. 483/DEL/2017 41. WE FIND, THE HONBLE DELHI HIGH COURT IN THE CA SE OF AREVA T & D INDIA LTD. VS. DCIT, 345 ITR 421 HAS DECIDED AN IDE NTICAL ISSUE IN FAVOUR OF THE ASSESSEE. IN THAT CASE, THE FOLLOWING SUBST ANTIAL QUESTION OF LAW WAS ADMITTED:- 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL ERRED IN LAW IN HOLDING THAT KNOW-HOW, BUSINESS CON TACTS, BUSINESS INFORMATION, ETC. ACQUIRED AS PART OF THE SLUMP SAL E DESCRIBED AS GOODWILL WERE NOT ENTITLED FOR DEPRECIATION UNDER SECTION 32 (1)(II) OF THE INCOME TAX ACT?' 42. WE FIND, THE HONBLE DELHI HIGH COURT IN THE SA ID DECISION HAS HELD THAT SPECIFIED INTANGIBLE ASSETS, VIZ., BUSINESS CL AIMS, BUSINESS INFORMATION, BUSINESS RECORDS, CONTRACTS, EMPLOYEES AND KNOW-HOW ACQUIRED BY ASSESSEE UNDER SLUMP SALE AGREEMENT ARE IN NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' S PECIFIED IN SECTION 32(1)(II) AND ARE ACCORDINGLY ELIGIBLE FOR DEPRECIA TION UNDER THAT SECTION. 43. THE RELEVANT OBSERVATION OF THE HONBLE HIGH CO URT FROM PARA 12 TO 15 ARE AS UNDER:- 12. IN THE PRESENT CASE, IT IS SEEN THAT THE ASSES SEE VIDE SLUMP SALE AGREEMENT DATED 30TH JUNE, 2004, ACQUIRED, AS A GOI NG CONCERN, THE TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANS FEROR COMPANY W.E.F. 1 ST APRIL, 2004. AS A RESULT THEREOF, THE RUNNING BU SINESS OF TRANSMISSION AND DISTRIBUTION WAS ACQUIRED BY THE TRANSFEREE LOC K, STOCK AND BARREL MINUS THE TRADEMARK OF THE TRANSFEROR WHICH WAS RET AINED BY THE TRANSFEROR, FOR LUMP SUM CONSIDERATION OF RS.44.7 C RORES. IT IS FURTHER SEEN THAT THE BOOK VALUE OF THE NET TANGIBLE ASSETS (ASS ETS MINUS LIABILITIES) ACQUIRED WAS RECORDED IN THE BALANCE SHEET OF THE T RANSFEROR AS ON THE DATE OF TRANSFER AS RS.28.11 CRORES. THE SAID ASSET S AND LIABILITIES WERE RECORDED IN THE BOOKS OF TRANSFEREE AT THE SAME VAL UE AS APPEARED IN THE BOOKS OF THE TRANSFEROR. THE BALANCE PAYMENT OF RS. 16,58,76,000/- OVER AND ABOVE THE BOOK VALUE OF NET TANGIBLE ASSETS, WA S ALLOCATED BY THE TRANSFEREE TOWARDS ACQUISITION OF BUNDLE OF BUSINES S AND COMMERCIAL RIGHTS, CLEARLY DEFINED IN THE SLUMP SALE AGREEMENT , COMPENDIOUSLY TERMED AS 'GOODWILL' IN THE BOOKS OF ACCOUNTS, WHICH COMPR ISED, INTER ALIA, THE FOLLOWING:- (I) BUSINESS CLAIMS, (II) BUSINESS INFO RMATION, (III) BUSINESS RECORDS, (IV) CONTRACTS, (V) SKILLED EMPLOYEES, (VI ) KNOWHOW. IT IS ALSO OBSERVED THAT THE AO ACCEPTED THE ALLOCATION OF THE SLUMP CONSIDERATION OF RS.44.7 CRORES PAID BY THE TRANSFEREE, BETWEEN TANG IBLE ASSETS AND 13 ITA NO. 483/DEL/2017 INTANGIBLE ASSETS (DESCRIBED AS GOODWILL) ACQUIRED AS PART OF THE RUNNING BUSINESS. THE AO, HOWEVER, HELD THAT DEPRECIATION I N TERMS OF SECTION 32(1)(II) OF THE ACT WAS NOT, IN LAW, AVAILABLE ON GOODWILL. THE CIT(A) AND THE ITAT APPROVED THE REASONING OF THE AO THEREBY H OLDING DISALLOWANCE OF DEPRECIATION ON THE AMOUNT DESCRIBED AS GOODWILL. I T WAS THUS ARGUED ON BEHALF OF THE ASSESSEE COMPANY THAT SECTION 32(1)(I I) WOULD MEAN RIGHTS SIMILAR IN NATURE AS THE SPECIFIED ASSETS, VIZ., IN TANGIBLE, VALUABLE AND CAPABLE OF BEING TRANSFERRED AND THAT SUCH ASSETS W ERE ELIGIBLE FOR DEPRECIATION. ON BEHALF OF THE RESPONDENT IT WAS AR GUED THAT APPLYING THE DOCTRINE OF NOSCITUR SOCIIS THE EXPRESSION 'ANY OTH ER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' USED IN EXPLAN ATION 3(B) TO SECTION 32(1) HAS TO TAKE COLOUR FROM THE PRECEDING WORDS ' KNOWHOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES'. IT W AS URGED THAT THE SUPREME COURT HAD CLEARLY HELD IN TECHNO SHARES AND STOCKS LTD.(SUPRA) THAT 'OUR JUDGMENT SHOULD NOT BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A 'LICENCE' OR A 'FRANCHISE' IN TERMS OF SECTION 32(1)(II) OF 1961 ACT'. 13. IN THE PRESENT CASE, APPLYING THE PRINCIPLE OF EJUSDEM GENERIS, WHICH PROVIDES THAT WHERE THERE ARE GENERAL WORDS FOLLOWI NG PARTICULAR AND SPECIFIC WORDS, THE MEANING OF THE LATTER WORDS SHA LL BE CONFINED TO THINGS OF THE SAME KIND, AS SPECIFIED FOR INTERPRETING THE EXPRESSION 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' SPECIFIED IN S ECTION 32(1)(II) OF THE ACT, IT IS SEEN THAT SUCH RIGHTS NEED NOT ANSWER TH E DESCRIPTION OF 'KNOWHOW, PATENTS, TRADEMARKS, LICENSES OR FRANCHIS ES' BUT MUST BE OF SIMILAR NATURE AS THE SPECIFIED ASSETS. ON A PERUSA L OF THE MEANING OF THE CATEGORIES OF SPECIFIC INTANGIBLE ASSETS REFERRED I N SECTION 32(1)(II) OF THE ACT PRECEDING THE TERM 'BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE', IT IS SEEN THAT THE AFORESAID INTANGIBLE ASSETS ARE NO T OF THE SAME KIND AND ARE CLEARLY DISTINCT FROM ONE ANOTHER. THE FACT THA T AFTER THE SPECIFIED INTANGIBLE ASSETS THE WORDS 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' HAVE BEEN ADDITIONALLY USED, CLEARLY DEMONS TRATES THAT THE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIAT ION ONLY IN RESPECT OF SPECIFIED INTANGIBLE ASSETS BUT ALSO TO OTHER CATEG ORIES OF INTANGIBLE ASSETS, WHICH WERE NEITHER FEASIBLE NOR POSSIBLE TO EXHAUST IVELY ENUMERATE. IN THE CIRCUMSTANCES, THE NATURE OF 'BUSINESS OR COMMERCIA L RIGHTS' CANNOT BE RESTRICTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOWHOW, PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES OR FRANCH ISES. THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS' CAN BE OF THE SAME GENUS IN WHICH ALL THE AFORESAID SIX ASSETS FALL. ALL THE ABOVE FALL IN TH E GENUS OF INTANGIBLE ASSETS THAT FORM PART OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOTH 14 ITA NO. 483/DEL/2017 CARRYING ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN CASE OF THE ASSESSEE, INTANGIBLE ASSETS, VIZ., BUSI NESS CLAIMS; BUSINESS INFORMATION; BUSINESS RECORDS; CONTRACTS; EMPLOYEES ; AND KNOWHOW, ARE ALL ASSETS, WHICH ARE INVALUABLE AND RESULT IN CARRYING ON THE TRANSMISSION AND DISTRIBUTION BUSINESS BY THE ASSESSEE, WHICH WA S HITHERTO BEING CARRIED OUT BY THE TRANSFEROR, WITHOUT ANY INTERRUP TION. THE AFORESAID INTANGIBLE ASSETS ARE, THEREFORE, COMPARABLE TO A L ICENSE TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANSFEROR. IN THE ABSENCE OF THE AFORESAID INTANGIBLE ASSETS, THE ASS ESSEE WOULD HAVE HAD TO COMMENCE BUSINESS FROM SCRATCH AND GO THROUGH TH E GESTATION PERIOD WHEREAS BY ACQUIRING THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE ASSETS, THE ASSESSEE GOT AN UP AND RUNNING BUSINESS . THIS VIEW IS FORTIFIED BY THE RATIO OF THE DECISION OF THE SUPREME COURT I N TECHNO SHARES AND STOCKS LTD.(SUPRA) WHEREIN IT WAS HELD THAT INTANGI BLE ASSETS OWNED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHICH EN ABLES THE ASSESSEE TO ACCESS THE MARKET AND HAS AN ECONOMIC AND MONEY VALUE IS A 'LICENSE' OR 'AKIN TO A LICENSE' WHICH IS ONE OF THE ITEMS FA LLING IN SECTION 32(1)(II) OF THE ACT. 14. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE SPECIFIED INTANGIBLE ASSETS ACQUIRED UNDER SLUMP SALE AGREEME NT WERE IN THE NATURE OF 'BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE ' SPECIFIED IN SECTION 32(1)(II) OF THE ACT AND WERE ACCORDINGLY ELIGIBLE FOR DEPRECIATION UNDER THAT SECTION. 15. IN VIEW OF THE ABOVE, IT IS NOT NECESSARY TO DE CIDE THE ALTERNATIVE SUBMISSION MADE ON BEHALF OF THE ASSESSEE THAT GOOD WILL PER SE IS ELIGIBLE FOR DEPRECIATION UNDER SECTION 32(1)(II) OF THE ACT . IN THE CIRCUMSTANCES, THE SUBSTANTIAL QUESTION OF LAW IS DECIDED IN THE A FFIRMATIVE AND THIS APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE AND THE IMPUGNED ORDER IS SET ASIDE. 44. WE FURTHER FIND THE SLP FILED BY THE REVENUE AG AINST THE AFORESAID DECISION WAS DISMISSED BY THE HONBLE SUPREME COURT , VIDE ORDER DATED 23 RD SEPTEMBER, 2013 VIDE SLP 21227/2012. 45. WE FURTHER FIND, THE DELHI SPECIAL BENCH IN THE CASE OF CLC & SONS PRIVATE LTD. (SUPRA), WHILE ALLOWING DEPRECIATION ON GOODWILL HAS HELD AS UNDER:- 7. IT IS OVERT FROM THE COMMAND OF CLAUSE (II) OF SECTION 32(1) OF THE ACT THAT DEPRECIATION IS PERMISSIBLE IN RESPECT OF INTA NGIBLE ASSETS LISTED HEREIN, ACQUIRED ON OR AFTER 01.04.1998. THIS CLAUS E CONTAINS CERTAIN 15 ITA NO. 483/DEL/2017 SPECIFIED AND UNSPECIFIED SPECIES OF INTANGIBLE ASS ETS. WHEREAS THE SPECIFIED INTANGIBLE ASSETS ENSHRINED IN THE PROVIS ION INCLUDE KNOW-HOW, PATENT AND COPYRIGHTS ITA NO.1976/DEL/2006 ETC., TH E UNSPECIFIED INTANGIBLE ASSETS HAVE BEEN DESCRIBED WITH THE EXPR ESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE.' I T IS NOBODY'S CASE THAT GOODWILL IS A SPECIFIED INTANGIBLE ASSET. THE ASSES SEE HAS SOUGHT TO COVER `GOODWILL' WITHIN THE EXPRESSION DEPLOYED TO DEFINE UNSPECIFIED INTANGIBLE ASSETS. AU CONTRAIRE, THE A.O. HAS CANVASSED A VIEW THAT THE EXPRESSION USED IN THE PROVISION FOR DEFINING UNSPECIFIED INTA NGIBLE ASSETS CANNOT EMBRACE SOMETHING WHICH IS INEXTRICABLY LINKED WITH THE BUSINESS OF THE ASSESSEE. HE BOLSTERED HIS POINT OF VIEW BY NOTING THAT THE SPECIFIED ASSETS IN THE PROVISION ARE SUCH WHICH ARE DETACHABLE FROM THE BUSINESS OF THE ASSESSEE AND TRANSFERRABLE INDIVIDUALLY AND SEPARAT ELY. IN THIS LIGHT, HE HELD THAT THE EXPRESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE' WOULD INCLUDE ONLY SUCH ASSETS WHIC H ARE TRANSFERRABLE DISTINCTLY. GOODWILL OF A BUSINESS, BEING, AN INTAN GIBLE ASSET WHICH CANNOT BE TRANSFERRED SEPARATELY DE HORS THE TRANSFER OF B USINESS, WAS, ERGO, HELD TO BE NOT INCLUDIBLE IN THE EXPRESSION USED IN THE PROVISION TO EXPLAIN THE UNSPECIFIED INTANGIBLE ASSETS. IN OUR CONSIDERED OP INION, THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HON 'BLE SUMMIT COURT IN CIT VS. SMIFS SECURITIES LTD. (2012) 348 ITR 302 (SC) IN WHICH IT ITA NO.1976/DEL/2006 HAS BEEN HELD: 'THAT GOODWILL WILL FALL UNDER THE EXPRESSION 'OR ANY OTHER BUSINESS OR COMMERCIAL RIG HTS OF SIMILAR NATURE'' AND, HENCE, QUALIFIES FOR DEPRECIATION U/S 32(1) OF THE ACT. WE, THEREFORE, ANSWER THE LEGAL ISSUE RAISED IN THE QUESTION BEFOR E THE SPECIAL BENCH IN AFFIRMATIVE BY HOLDING, IN PRINCIPLE, THAT DEPRECIA TION IS AVAILABLE ON GENUINE GOODWILL. 46. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD . COUNSEL FOR THE ASSESSEE ALSO SUPPORT HIS CASE TO THE PROPOSITION T HAT DEPRECIATION IS ALLOWABLE ON GOODWILL. 47. WE FURTHER FIND THE ALLEGATION OF THE AO THAT T HE YEAR-WISE REVENUE FROM LOGISTIC SERVICES TO IBM INDIA IS SHOWING A DE CLINING TREND IS ALSO INCORRECT. A PERUSAL OF THE CHART AT PARA 32 OF TH IS ORDER SHOWS THAT THERE IS, IN FACT, INCREASE OF REVENUE FROM IBM. 48. IN VIEW OF THE ABOVE DISCUSSION AND RELYING ON THE DECISIONS CITED (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO D EPRECIATION ON GOODWILL. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY AL LOWED. 16 ITA NO. 483/DEL/2017 25. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-O RDINATE BENCH, WE DIRECT THE ASSESSING OFFICER TO ALLOW CLAIM OF DEPR ECIATION OF GOOD WILL. THIS GROUND IS, ACCORDINGLY, ALLOWED. IN THE PRESENT APPEAL, THE ISSUE IS IDENTICAL TO TH AT OF EARLIER YEARS AND NO DISTINGUISHING FACTS POINTED OUT BY THE REVENUE. T HE DRP HAS NOT AT ALL CONSIDERED THE ASPECT OF DEPRECIATION ON GOODWILL I N CORRECT CONTEXT AS THERE IS A FINDING IDENTICAL TO THAT OF EARLIER YEARS, ASSES SEE ENTERED INTO A WORLD-WIDE MULTI-YEAR OUTSOURCING AGREEMENT WITH IBM INDIA PVT . LTD., NETWORK SOLUTIONS PVT. LTD. AND IBM DAKSH BUSINESS PROCESS SERVICES P VT. LTD. AS WELL AS ACQUISITION AGREEMENT AND THIS IS NOT AN INITIAL YE AR OF CLAIM OF DEPRECIATION ON GOODWILL. HENCE, IN LIGHT OF THE DECISION OF THE EA RLIER YEARS BY THE TRIBUNAL THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT IN PRESENCE OF B OTH THE PARTIES ON THIS 17TH DAY OF MARCH, 2021 SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 17/03/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 17 ITA NO. 483/DEL/2017 ASSISTANT REGISTRAR ITAT NEW DELHI
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